Notes from Q&A part of Ciena CC. (Long post)
Q – Gross margin slippage – outsourcing only cause?
Does Metro product affect GM? GTS A/R?
A – No pricing pressures affecting GM
Metro - no affect on GM;
GTS – comfortable w/ financial health; GTS will be concentrating on optical side of system which Ciena sells to; Feel comfortable with A/R, they pay regularly
Q – More about GM and capacity issues?
A – Are growing in-house capacity; improvements in GFM will come from lower outsourcing costs; high costs in Q4 due to start-up of outsourcing relationships.
Core Director (CD) costs not changing GM
Service costs were higher due to higher sales; offered anecdote – when they send an installation crew to customer and customer is not ready, the crew waits – they do not pull them back and re-schedule. Ciena eats the cost of the down time. Indication of importance of customer service to Ciena.
Q – Deferred revenues increased $8 million in Q4 – reason?
A- Awaiting completion of installations; all should be recognized in Q1-01
Q – Competitors seeing now?
A- Seeing definite shift away from legacy companies; depends on market, as follows
Tellium – Switching
NT – Long haul
Oni – Metro
Q – ILECS shifting?
A – They’d (Ciena) would like them to, but it will be a slow process; the ILECS are showing interest in CD.
Q – When will CD be 10% of sales? This FY?
A – Potential for CD to hit 10% of sales in Q1-01 if deployments are on schedule;
Q - What about 10% customers?
A – Disclosed in 10K – QWEST, Sprint, and GTS
Q – Ultra long haul market size, customer orders?
A – Size is about 10% of the overall market; its growing nicely; part of total package; have 2 orders to date – XO is one of them; hard to predict future, but could see 6 to 7 customers.
Q-Something about FD interface – I did not understand enough of technical lingo to understand all of the question and answer, but Ciena did say FD interfaces are a significant market opportunity; see hundreds of million (units? Dollars?) even in Q1.
(Someone please clarify this!)
Q – When will CD be profitable?
A – If sales hit 10% mark in Q-1, C will be profitable.
Q – Where is Iaxys in the numbers?
A - $19.1 million in Provision for Doubtful Accounts for Q4; for year $28 million in PDA with $8.5 mil in Q3.
I did not understand where the $9 million they are going to be paid shows up? Help?
Q – Any other customers with credit concerns?
A – No. (Note DSRs were up slightly due to Iaxys, but within the target range.
Q-CD & Metro – number of customers and trials?
A – Only report when product is starting out; Metro is now high enough that no longer report this; CD is in four more trials, total customers now 14, with 10 more added in Q4.
Metro added 2 customers, but total number not split out.
Q – See any sales pricing pressure
A – No, pricing is not at top of list [of concerns?] w/ CD and Metro customers
Q – Sales trends between chassis and channel cards [hope I have this correct]
A – Shipping higher channel count products; Broadwing is customer for top product.
Q – Backlog?
A – Do not give detail, but orders on hand are equal or greater than Q3
Q - Component pricing and availability?
A – Some optical component availability and pricing getting better; prices are decreasing slowly but steadily.
Q-CD revenue in 2001
A – Hope to get it above 10% in 2001
Q – [Analyst had none – said all his questions had been answered]
Q – Number of companies and efforts in access space?
A – Seeing limited customer traction even w/ great technologies; exotic technologies are not necessary [assumed he meant can address needs more simply]
Q – Leveraging long haul (LH) customers into Metro?
A – QWEST is deploying Metro
Q - % of LH customers buying Metro?
A - Metro is closing in on 10% of revenue; there is overlap for LH and Metro [meaning former is a lead-in for latter]; LH will also help with selling switches.
Q – Any alliances with next generation optical switch vendors?
A – Yes, but cannot say any more.
Q – Dynergy (buying Iaxys) – ability to sell Metro and CD along with LH?
A – Yes – looking to sell all products to them.
Comment – Interesting that no one asked if there was any problem with Sprint as a customer.
Please make additions or corrections. |
